Review & Preview: The Fed’s Fog

Oct 29, 2025 18:02:00 -0400 by Megan Leonhardt | #Markets #Review & Preview

Counting Chickens. I grew up hearing the expression “don’t count your chickens before they hatch” and today’s Federal Reserve press conference was an excellent example of why. Assumptions live to be upended.

Heading into today’s Fed decision, the odds of a December rate cut were above 90%. But the forecast reversed in dramatic fashion today after Fed Chair Jerome Powell said another rate cut—beyond this afternoon’s quarter-point cut—wasn’t a foregone conclusion. More on that below. Stocks turned lower on the somewhat hawkish tone from the Fed chair.

After spending much of the day heading for its next record close, the S&P 500 ended flat. And the Dow Jones Industrial Average fell 74 points, 0.2%, snapping a four-day winning streak. The tech-heavy Nasdaq Composite managed to gain 0.6%.

The Fed meeting was expected to be something of a snooze, with many predicting that earnings would again overshadow the central bank.

Fed officials had telegraphed today’s rate cut far in advance. In fact, the biggest point of anticipation heading into the 2 p.m. hour was whether policymakers would stop shrinking the balance sheet, a strategy known as quantitative tightening, or QT. (Spoiler, they did.) The Fed will conclude the reduction of its aggregate securities holdings on Dec. 1.

But the results of the meeting and subsequent press conference turned out to be anything but boring. The newest Fed governor Stephen Miran dissented again, seeking a half percentage point cut. In a surprise to some, Kansas City Fed President Jeffrey Schmid dissented in the opposite direction, arguing for no cuts at this latest meeting.

But Schmid had dropped hints about his vote. He contended earlier this month that the Fed needed to maintain its credibility on inflation, which is now trending roughly a full percentage point above the Fed’s 2% target.

“With inflation still too high, monetary policy should lean against demand growth to allow the space for supply to grow and relieve price pressures in the economy,” Schmid said then.

The Fed’s interest-rate decision released at 2 p.m. was followed by an intense press briefing, with Powell taking questions on a range of topics, including the market performance, the rise of artificial intelligence investments (not a bubble) the health of the labor market (not materially deteriorating just yet), and the economic impact of the shutdown (still likely to be short-lived).

Read Barron’s full coverage of the Fed meeting here.

As for tomorrow’s trading, earnings are likely to actually take center stage once again. After market’s closed tonight, Meta Platforms, Microsoft, and Alphabet all reported their quarterly results. It was a mixed performance. Meta shares were falling sharply in after-hours trading, as AI costs weigh on margins. Microsoft’s cloud business is growing quickly, but high expectations seem to be weighing on the stock. It was also down in late trading.

Google-parent Alphabet was the evening’s big winner. It blasted by revenue and earnings estimates. The stock spiked.

Company

Last

Chg

Chg%

Dow Jones Industrial Average

47,632.00

-74.37

-0.16%

S&P 500 Index

6,890.59

-0.30

-0.00%

NASDAQ Composite Index

23,958.47

130.98

0.55%

Market Data as of

The Hot Stock: Teradyne +20.5%
The Biggest Loser: Fiserv -44.0%

Best Sector: Energy +0.7%
Worst Sector: Real Estate -2.7%

Created with Highcharts 9.0.1Wednesday, Oct. 29Index performanceSource: FactSet

Created with Highcharts 9.0.1Oct. 29-0.6-0.4-0.200.20.40.60.81.0%Nasdaq CompositeS&P 500Dow industrials

December Fog

Federal Reserve Chair Jerome Powell warned investors this afternoon that another interest rate cut in December isn’t a foregone conclusion. “Far from it,” Powell said.

Fed policymakers had previously indicated in their September Summary of Economic Projections that they were penciling in rate cuts at both the October and December meetings. The Fed followed through on the game plan Wednesday, cutting interest rates by a quarter of a percentage point to a target of 3.75% to 4.00%.

But the government shutdown could shift the paradigm for the coming Dec. 9-10 meeting.

“We continue to face two sided risks. In the committee’s discussions at this meeting, there were strongly differing views about how to proceed in December, a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it,” Powell said at today’s press briefing following the Federal Open Market Committee meeting.

Since the government shutdown started on Oct. 1, statistical agencies haven’t published economic data, depriving Fed officials of critical measures including labor, consumer spending, and the bank’s preferred inflation measure. Instead, policymakers have had to rely on an array of private data and state administrative records—as well as regional bank surveys and research—to cobble together a picture of the U.S. economy.

But that only goes so far. In Wednesday’s statement, for example, the Fed noted that “available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August.” That was the last month with official Bureau of Labor Statistics data.

September job numbers haven’t been released and October will likely be delayed as well, even if the shutdown ends before the scheduled Nov. 7 publication date.

Powell said the Fed is currently looking at a variety of private indicators—from firms like PriceStats and Adobe —for inflation trends. For wage growth, Powell said policymakers are looking at ADP data. “It’s many, many different sources, and again, including what we get out of the Beige Book.”

But Powell was clear: These sources don’t replace government data.

“I don’t think we will have a granular understanding of the economy while this [government] data is not available,” Powell said.

That won’t stop Fed officials from doing their job, but it could add a layer of hesitation to an already cautious group. “This is a temporary state of affairs, and we’re going to do our jobs. We’re going to collect every scrap of data we can find, evaluate it, and think carefully about it,” Powell said.

He wouldn’t, however, rule out that the more limited data could weigh on upcoming meetings. In fact, Powell all but confirmed the dearth of data could make Fed officials more cautious. “If you’re driving in the fog, you slow down,” he said. “The data may come back, but there’s a possibility that it would make sense to be more cautious about moving [forward]. I’m not committing to that. I’m just saying it’s certainly a possibility.”

The Calendar

Altria Group, Amazon, Ameren, Ameriprise Financial, Anheuser Busch-InBev, Apple, Arthur J. Gallagher, Baxter International, Biogen, Bristol Myers Squibb, Builders FirstSource, Cardinal Health, Cigna Group, CMS Energy, Coinbase Global, Comcast, DexCom, Edwards Lifesciences, Eli Lilly, Erie Indemnity, Estee Launder, First Solar, Fox, Gilead Sciences, GoDaddy, Hershey, Huntington Ingalls Industries, Ingersoll Rand, Intercontinental Exchange, International Paper, Kellanova, Kimberly-Clark, Kimco Realty, L3Harris Technologies, Mastercard, Merck, Monolithic Power Solutions, Motorola Solutions, Quanta Services, Reddit, Republic Services, ResMed, Roblox, Shell, Southern Co., S&P Global, Stryker, Vulcan Materials, Western Digital, WEC Energy Group, Weyerhaeuser, and Xcel Energy report earnings tomorrow.

The European Central Bank and Bank of Japan announce their monetary policy decisions. Both central banks are widely expected to keep their key short-term interest rates unchanged at 2% and 0.5%, respectively.

What We’re Reading Today

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